American Depository Receipts (ADRs) represent shares of a foreign company that trade on an American stock exchange. There are three levels of ADRs with different regulatory requirements. Level 1 ADRs trade over-the-counter with the least regulation, while Level 3 ADRs have the most rigorous regulations, potentially including raising capital from US investors. ADRs make it possible for US investors to gain international stock exposure without having to deal with foreign exchange or open overseas accounts. Global Depository Receipts (GDRs) operate similarly but trade on exchanges outside the US, while Indian Depository Receipts (IDRs) allow foreign companies to issue shares to Indian investors.

1. Infosys American Depository Receipts (ADR) Anshuman Jaiswal (G09051) Charlton DCosta (G09053) Deepti Chand (G09055) GMP, XLRI, Jamshedpur

2. What is ADR Certificates that represent shares of a foreign stock owned and issued by a U.S bank They buy up shares of the foreign stock and repackage them into securities which can be traded on the NYSE, NASDAQ or AMEX. The foreign shares are usually held in custody overseas, but the certificates trade in the U.S. They provide easy access to gaining international equities exposure without actually having to exchange currencies and open additional accounts to transact in overseas GMP, XLRI, Jamshedpur

3. TYPES OF ADR Level 1 – Basic, common, traded on OTC, least regulation, no US accounting standard, no annual reports Level 2 – Listed on stock exchange, higher trading volumes Level 3 – Most rigorous regulations, go as far as raising capital from US investors If the depository receipt is traded in the United States of America (USA), it is called an American Depository Receipt, or an ADR. GMP, XLRI, Jamshedpur

4. GDRs and IDRS If the depository receipt is traded in a country other than USA, it is called a Global Depository Receipt GDR gives access to two or more markets ADRs and GDRs are an excellent means of investment for NRIs & foreign nationals wanting to invest in India IDR is instrument in form of Depository Receipt created by the Indian depository in India against the underlying equity of investing company. Foreign companies  Issue shares, to Indian Depository  Issue depository receipts. The actual shares underlying the IDRs held by Overseas Custodian. GMP, XLRI, Jamshedpur

5. Issuance Process GMP, XLRI, Jamshedpur

6. ADR Termination GMP, XLRI, Jamshedpur

7. How to price ADR Each ADR represent a single share, a fraction of shares or multiple shares. The depository bank sets the ratio of US ADRS per home country share. Ratio can be =1,<1 and >1 Once ADR priced & sold in the market, its price moves based on the market conditions GMP, XLRI, Jamshedpur

8. ADR: Companies/Shareholder's perspective Disadvantages Advantages Limited selection Liquidity Exchange rate risk Limited Diversification Cost Effective Hassle Free Ease of Usage Risk Diversification Protection of Ownership GMP, XLRI, Jamshedpur

9. Summary of the Infosys ADRs issued * % of share in the form of ADRs as on March 31, 2007 GMP, XLRI, Jamshedpur

10. Infosys ADR: 11th March 1999 GMP, XLRI, Jamshedpur

11. First Sponsored secondary ADS: July 31, 2003 GMP, XLRI, Jamshedpur

12. Second sponsored secondary issue: May 2005 GMP, XLRI, Jamshedpur

13. Third sponsored secondary issue: November 21, 2006 GMP, XLRI, Jamshedpur

14. Reasons why ADR’s was overpriced Excess demand with limited supply of ADR’s. Few opportunities in the US to invest in companies that are growing at the 20–30% rates Official barriers prevent foreign investors from buying the shares trading in India Returns are negatively correlated with other assets held by them. ADR’s provides a value added layer – transparency, liquidity and greater coverage than the existing Indian stock. GMP, XLRI, Jamshedpur

15. Return Behavior :INFY ADS vs. NASDAQ vs. Infosys Tech GMP, XLRI, Jamshedpur

16. 10 year view GMP, XLRI, Jamshedpur

17. Factors Inducing Differences in Returns between Domestic Shares and ADRs Time Difference Exchange Rates Market Friction and Trading Restrictions Macro Events GMP, XLRI, Jamshedpur

18. THANK YOU!! GMP, XLRI, Jamshedpur